Gas prices are a pain point for drivers, but they're also a headache for gas station owners. While drivers are frustrated by the high cost of fuel, station owners are struggling to stay afloat as the cost of wholesale gas rises, squeezing their already thin profit margins. This is particularly challenging for small businesses, which make up the overwhelming majority of gas stations. The situation is exacerbated by other rising costs, such as credit card fees and delivery charges, as well as labor costs that are still up from the last gas spike in 2022.
Chris Bambury, a third-generation gas station owner in Sonoma Valley, California, is feeling the pinch. His family has been in the business for over a century, but even he can't remember a time when gas was so expensive. The price of regular gas at his stations was $6.29 per gallon last week, which is actually considered cheap for his region. Bambury's great-grandfather, August Bonneau, started selling gas in 1922, before paved roads were even a thing in his part of California. Bambury himself started in the family business as a teenager, pumping gas and cleaning bathrooms, and now has 37 employees.
However, the current gas crisis has taken a toll on his business. Before the war in Iran began in late February, gas was selling for $4.79 per gallon. Bambury wants to keep prices low to drive customers away, but he also needs to make a profit. He acknowledges that customers haven't blamed him for the prices, attributing them to the war and the Strait of Hormuz.
The situation is similar for Harry Singh, a gas station owner in Nutley, New Jersey. Singh has owned his station since 2009, but he's considering shutting down fuel sales and focusing on the attached car repair garage. He's losing customers to a nearby Costco that sells gas for even cheaper, and his regular customers are buying less.
The average gap between wholesale and retail prices is about 22 cents per gallon, according to Jeff Lenard, a spokesperson for the National Association for Convenience Stores. However, this 22-cent margin needs to cover all other costs, so station owners are only likely to break even. The average gross margin over the last five years was 38.3 cents per gallon, indicating that many owners are losing money on fuel sales.
Even when wholesale gas prices start to fall, it can take time for retail prices to follow. Station owners will need to lower prices slowly to recoup the profits lost during the price spike. This is because they paid more for the gas they have on hand, which delays how quickly they can cut their retail prices.
Lonnie McQuirter, a gas station owner in Minneapolis, has also seen a decline in sales due to increased enforcement by Immigration and Customs Enforcement, which caused a drop in driving. He's now dealing with the challenges brought on by high gas prices, including a 20-cent per gallon increase in wholesale costs over the past week.
In conclusion, gas station owners are facing a tough situation as they struggle to balance rising costs and falling sales. While drivers are frustrated by the high cost of fuel, station owners are also feeling the pain. The situation highlights the interconnectedness of the gas industry and the impact of global events on local businesses. It also underscores the need for station owners to carefully manage their costs and prices to stay afloat in the face of uncertainty.
